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Clarion Group predicts Increasing Sales in New Markets throughout 2014

The operators of corporate food services can look forward to a good year in 2014, according to Tom Mac Dermott, FCSI, president of Clarion Group, a food service consulting firm. Even some of the bad news for the year has a silver lining, he says.

"With the economy continuing to improve, the trend of increasing sales seen since early 2013 is likely to continue through the year,” he said. “With the job market strengthening, people are feeling a little more confident that their jobs are secure. While consumers still are cautious in their spending, good marketing and promotions will help bring them back to the company café.”

Mac Dermott sees only a few clouds on the horizon for 2014: An inflationary rise in wholesale food costs and in some markets, a tightening of the supply of qualified hourly workers.

“Most corporate food service operators didn’t raise prices, or raise them by much, in 2012 and 2013,” he notes. “Food cost inflation was fairly flat and customer price/value sensitivity made that a sound decision.”

“However, the U.S. Department of Agriculture anticipates a greater rise in 2014 for most product categories of the Producer Price Index (PPI), which represents prices at the wholesale level. Estimates of increases range from 5.5%-6.5% for pork and 1.5%-2.5% for beef to 0% for dairy products and minus 3%-4% for fresh vegetables. Clarion Group’s estimate is that overall wholesale food prices will increase by about 2.5% in the year.”

“But there’s opportunity attached to the bad news,” Mac Dermott added. “The USDA’s forecast for food prices at retail, the Consumer Price Index, is expected to increase by more, an average of 2.5% to 3.5% in the year. As customers see prices rising in the supermarket and their favorite restaurants, they are more likely to accept price increases in the company café.”

“An astute corporate food service manager won’t raise menu prices across the board all at once,” he says, “but will selectively raise prices as the cost of individual items increase during the year. The increases should coincide with price increases in nearby restaurants and supermarkets. Customers won’t feel the pain of a sudden increase in their costs and are more likely to understand and accept higher prices, because they’re seeing them elsewhere.”

The other potential challenge Mac Dermott foresees in the new year is a possible shortage of qualified employees in some markets.

“As hiring picks up and unemployment rates go down, it’s likely the pool of good employees will shrink in markets where the economy is prospering,” he says. “Corporate food service operators will have to provide more training for inexperienced new hires to make them competent and productive. It will be advisable to offer additional training and opportunities for advancement to current employees to keep them engaged and enthusiastic about their jobs.”

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About Clarion Group

Clarion Group is an consulting firm that advises companies, professional firms, colleges and universities, independent schools and institutions in the management, operation and improvement of their in-house employee/student food services, catering, conference, lodging and related hospitality services throughout the U.S. and Canada.